UNITED Utilities has underlined how it is overcoming the impact of tough price controls, which have dented profits at its water and electricity power businesses.

Since 2000, the north west giant has been compelled by regulators to freeze its water charges and reduce those for electricity by three per cent.

As a result, the Warrington-based business has focused on managing other utilities' activities and assets, on building its customer management outsourcing arm, Vertex, and its telecoms operation, Your Communications.

Operating profits in its utility business fell 3.9 per cent to é251.7m in the six months to September 30.

But they soared by 85.4 per cent in its asset management services division, to é28m. United Utilities manages contracts for companies such as British Gas and Welsh Water, serving more than 10 million people in the UK and abroad.

Vertex, its outsourcing arm, saw profits rocket 22.9 per cent to é8.6m despite sales growth of just 6.3 per cent to é142.8m.

The business, based near Manchester Airport, has won major public sector contracts, such as ones with the Department for Work and Pensions and Westminster City Council, the latter being worth up to é422m over 15 years.

The Vertex order book grew 35 per cent in the half-year to é1.9bn.

Reducing losses

UU's Your Communications increased turnover by eight per cent to é79.3m, and reduced its operating losses by 19 per cent to é10.2m. It is expected to break even next year.

Overall, UU's turnover rose just 0.5 per cent to é914.8m and operating profits increased 1.1 per cent to é278m. Pre-tax profits before exceptionals were up one per cent at é164m. The interim dividend is up 1.3 per cent to 15.5p.

Chief executive John Roberts had warned of a challenging year because of regulatory price controls and the acceleration of UU's capital spending programme.

He said: "Through growth in our support service businesses and improved efficiency in our regulated businesses, we're successfully meeting this challenge."

UU made capital investments totalling é288m in the half-year, the bulk of which was spent on water and wastewater initiatives.

The company is spending at least é40m to reduce the number of foul flooding incidents in the north west.

Turnover in its asset management arm rose 17.4 per cent to é167.6m. UU has a number of contracts in central and eastern Europe as well as in the UK.

Mr Roberts said Your Communications increased higher-margin sales of services to businesses by 28.3 per cent to é63.5m, while its premium rate services fell by 34 per cent to é15.8m.